National income statistics
Measuring national income
- National income = the total value of everything an economy produces in a year.
- GDP = value of goods/services made inside a country.
- GNI = GDP plus income earned abroad minus income foreigners earn inside it.
- nominal = current prices; real = adjusted for inflation (compare real over time).
- per capita = divided by population.
Practice
GDP is the value of all goods and services:
GDP measures output produced inside a country; GNI adds net income from abroad.
Practice
To compare output over time fairly, you should use:
Real values remove the effect of rising prices, showing the true change in output.
Uses and limits
- Used to measure the standard of living and compare countries. But it:
- ignores income distribution (a high average can hide inequality),
- leaves out unpaid work and the informal economy,
- says nothing about pollution, leisure or health.
Practice
A limitation of using GDP per capita as a measure of living standards is that it:
A high average can hide great inequality; GDP also omits unpaid work, the informal economy and pollution.
You've got it
Key idea
- GDP = output made inside a country; GNI adds net income from abroad
- compare real (inflation-adjusted) and per capita values
- GDP per capita ≈ living standards, but ignores distribution, unpaid work and pollution